Regulatory Cooperation

Introduction

Historically, regulatory cooperation has referred to how nation states wishing to set up a trade deal work together in order to bring their regulations (such as those concerning food safety, or employment rights) into alignment in order to remove obstacles to trade.

However, in the new generation of trade deals (such as TTIP and CETA), the way regulatory cooperation is used raises concerns about how new trade deals will impact on domestic policy, and how they may undermine the higher standards of one party to the agreement, such as those standards governing the safety of food, drugs or chemicals, labour rights and intellectual property.

In addition, regulatory cooperation raises concerns about how the alignment of regulations is brought about. Through trade deals like TTIP, for example, there have been concerns that corporate influence will become an intrinsic part of the development of goverment regulation.

The detail

Regulatory alignment can be brought about through what’s known as

  • ‘harmonisation’ (the most extreme form, making regulations and common standards between the trading partners as similar as possible), or
  • ‘mutual recognition’ (the acceptance of the trading partner’s standards as equivalent) that aims to remove the need for border checks on goods certified as equivalent.

However, there can be considerable divergence between the standards of trading partners like the EU and US, stemming in part from different approaches to assessing safety, and different decision-making procedures. This wide divergence can make it difficult to achieve regulatory convergence during trade deal negotiations, and so some mechanism, like regulatory cooperation, can become necessary as a long term measure to allow the trade partners to work out their differences.

In many regulatory areas, the EU (and so the UK) has had higher standards. For example, in the US, producers can assume that products are safe until shown to be harmful (and research that demonstrates safety may remain unpublished on the grounds of commercial confidentiality). But in the EU companies must prove their products are not harmful before they can be sold. There are serious concerns that, with measures to remove obstacles to trade – like the harmonisation or mutual recognition of regulations, and the potential influence of corporations through regulatory cooperation – that EU standards will be lowered.

Regulatory cooperation between the EU and US is not new: what is new is the level of ambition for this in new agreements.  For example, in the case of TTIP, if agreed, big business and the US government will be able to exert significant influence on the development of the EU’s regulatory policy. Corporations will have input from a very early stage, if not actually involved in co-writing proposals.  And there will be no limit to the kind of regulation that can be considered appropriate for their attention – it covers anything you can make money on.

Leaks about the US proposals when negotiating TTIP indicate that the US was calling for:

  • regulatory cooperation to become mandatory, with the strong involvement of business built into joint procedures;
  • regulatory cooperation to be overseen by a powerful body, initially called the Regulatory Cooperation Council, but now called the Regulatory Cooperation Body (RCB).
  • An early warning mechanism to ensure that the partners to the treaty become involved in the preliminary stage of each others regulatory decision making – typically in the drafting phase – before elected politicians become involved.
  • The methods for undertaking Regulatory Impact Assessments (part of the process of deciding whether to regulate and how to strike a balance between protecting the citizen and limiting the impact on businesses) to be reformed, with special attention to the effects of a proposal on trade.
  • Both sides to be able to call for a ‘regulatory exchange’ at any point in the decision making-process. This would be a formal ‘crisis meeting’ in which the European Commission and US representatives discussed either a planned or existing regulatory measure, including member state legislation, to identify ways of preventing one side from adopting a rule that would harm the others’ interests.

The inclusion of ‘regulatory cooperation’ in a trade and investment agreement is different to cooperation between states that aims to jointly address social or environment problems or raising standards. Instead, regulatory cooperation aimed at increasing trade allows the surreptitious dismantling of regulations  – even after a treaty has been signed: this is why deals like TTIP have been called a living agreement. It means that regulations, such as those governing public health, are strongly shaped by trade negotiators rather those with expertise in public health.

The Regulatory Cooperation Bodies that TTIP and CETA called for are constituted by individuals who are not accountable to democratic institutions. Nor do they include representatives from among those most affected by the regulations in question. Instead, the voice of multinational corporations holds sway. Some see that this kind of regulatory cooperation is even more advantageous to transnational corporations than investment protection measures like ISDS. What’s more, just the prospect that regulatory cooperation might have been included in TTIP seemed to deter the EU from regulating. For example, apparently in response to threats from the US about the future of TTIP, the EU repealed a ban on the treatment of beef with lactic acid and abandoned plans to ban certain pesticides associated with cancer and infertility.

The inclusion of regulatory cooperation in new FTAs is of additional concern as it is happening alongside plans on the part of various governments to reduce or remove regulation.  For example, the European Commission,  strongly influenced by the current UK government, has a programme called Better Regulation. This started out as a way of cutting unnecessary ‘red tape’ but over time has become much more ambitious, gradually removing the legislative safety net protecting the health of the public and the environment, supposedly to increase jobs and growth.  A similar process is taking place in the USA, where it is more advanced.

Any post-Brexit deal between the UK and the US will take place in a context in which the UK is in a very weak negotiating position, and in which, at present, Parliament has little to no say about the scope or content of new trade deals, including whether these will include regulatory cooperation. This means there is an urgent need for politicians and civil societies to push for a much stronger role in determining the shape of future trade deals.

Sources and further information

http://corporateeurope.org/sites/default/files/attachments/regulatoryduet_en021.pdf

http://arstechnica.co.uk/tech-policy/2016/01/you-thought-isds-was-bad-ttips-regulatory-cooperation-is-even-worse/

https://www.tjm.org.uk/documents/briefings/trade-public-health-brexit.pdf

http://freecriticalthinking.org/international-trade

updated November 2019

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